Reassessment of the CHIPS and Science Act

Enacted in 2022, the “CHIPS and Science Act” allocated substantial funding to bolster domestic semiconductor manufacturing and research. Despite its bipartisan support, President Trump has criticized the act, describing it as unnecessary subsidization.

“Your CHIPS Act is a horrible, horrible thing. We give hundreds of billions of dollars and it doesn’t mean a thing. They take our money and they don’t spend it… You should get rid of the CHIPS Act and whatever is left over, Mr. Speaker, you should use it to reduce debt.”

Remarks by President Trump in Joint Address to Congress, March 4, 2025

Reports suggest that the Administration is considering repealing or modifying the law, favoring broader tax reductions and elevated tariffs as mechanisms to stimulate a “manufacturing renaissance.” Such a policy shift will inevitably impact ongoing and future semiconductor projects within the United States.

At a minimum, the Trump Administration will likely review and look for opportunities to modify contracts and grants issued under the Biden Administration, including trying to remove provisions related to diversity, equity, and inclusion. Companies that participated in the “CHIPS Act” programs should expect increased scrutiny from federal departments, Inspector Generals, and Congress looking to prove that the Biden Administration wasted taxpayer funds in carrying out the “CHIPS Act.”

Elevated Tariffs, Export Controls, and Technology Restrictions

Consistent with his “America First” trade philosophy, President Trump has launched into imposing significant tariffs on imports, including a universal 20% tariff on Chinese goods and 25% tariff on all products from Canada and Mexico – with notable exceptions for those covered by the United States–Mexico–Canada Agreement (USMCA). With additional measures under consideration, these moves are anticipated to disrupt global supply chains, particularly affecting the semiconductor industry, which relies heavily on international collaboration. The imposition of these tariffs could lead to increased costs for consumer electronics and potential retaliatory actions from trade partners.

During the final months of the Biden Administration, significant export controls were introduced to limit China’s access to advanced U.S. semiconductor technology, citing national security concerns. These measures included restrictions on advanced AI chips, cloud access, and model weights. The implementation of these controls now falls under the purview of the Trump Administration.

That said, while President Trump has historically advocated for stringent measures against China, certain post-election actions suggest a pragmatic moderating. In a notable example, President Trump delayed the shutdown of TikTok to facilitate a sale of the app, indicating that the Administration may reassess existing export controls to balance national security concerns with economic interests. However, any effort to significantly relax export restrictions on advanced chips to China will run into bipartisan opposition from Congress as well as China hawks within the Administration.

Deregulation and Industry Incentives

In alignment with its broader deregulatory agenda, there is an expectation that the Trump Administration will relax regulations across the technology sector. Notably, President Trump revoked an executive order on artificial intelligence signed by former President Biden, suggesting an intention to foster innovation and reduce compliance burdens for technology companies. This policy shift is likely to create a more favorable environment for domestic semiconductor manufacturers and encourage increased investment and production within the United States, along the lines of the recently announced US$500 billion Project Stargate.

A second “CHIPS Act” is unlikely to gain traction in Washington. Many Republican members of Congress have committed to making federal spending cuts in exchange for a US$4 trillion dollar increase in the debt ceiling, a reauthorization of President Trump’s Tax Cuts and Jobs Act (TCJA), new tax breaks, and additional funds for border security and the military. As it stands now, there is simply no appetite among congressional Republicans for another large spending bill. TCJA reauthorization does present some opportunities for chip industry stakeholders, as bipartisan provisions being discussed include reinstating immediate R&D expensing.

Geopolitical Implications

The Administration’s policies are poised to reshape the global semiconductor landscape significantly. By implementing protectionist measures and reassessing existing trade agreements, the Trump Administration aims to strengthen the U.S.’s position in the semiconductor sector. However, there is a real risk that these actions lead to heightened geopolitical tensions, particularly with China and Europe, and could result in retaliatory measures affecting other industries. The potential for a more fragmented global market poses challenges for corporations operating within the semiconductor supply chain.

Conclusion

In summation, President Trump’s Administration is adopting a more protectionist and assertive approach in the semiconductor industry, focusing on reshoring manufacturing through a combination of export controls, de-regulation, favorable tax policy, and tariffs. While these policies aim to bolster U.S. competitiveness, they also introduce uncertainties and potential challenges within the global semiconductor landscape.